accounting & economics for business 6 november

www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

ECONOMICS FOR BUSINESS

AFTERSCHO☺OL – DEVELOPING CHANGE MAKERS

CENTRE FOR SOCIAL ENTREPRENEURSHIP PGPSE PROGRAMME –

World’ Most Comprehensive programme in social entrepreneurship & spiritual entrepreneurship

OPEN FOR ALL FREE FOR ALL


ECONOMICS FOR BUSINESS

Dr. T.K. Jain.

AFTERSCHO☺OLCentre for social entrepreneurship

Bikaner M: 9414430763

[email protected]

www.afterschool.tk, www.afterschoool.tk


Study the production possibility curve below. X axis is for consumer goods, capital goods is denoted by

Y axis.


Which points in PPC represent equal production?

• A,B,C,D


Which points in PPC represent highest production?

• W


Which points in PPC represent lowest production?

• U


Which is the equilibrium point?


Solution

• Q == because this is the point, where highest indifference curve touches the budget line.


In the graph,which indifference curve shows least satisfaction?


Solution

• IC 1


If a consumer’s income increases, which ICs will he touch?


Solution

• The consumer will shift from IC3 to IC4 and then to IC 5.


Which is the budget line? What will happen, if income decreases and

price of X also decreases?


Solution

• Budget line is YL.

• The point L will not shift much. But the point Y will shift toward below and the budget line will shift below.


What is FII?

• Foreign institutional investors

• They invest money in the secondary market – in stock markets etc.


What is private placement?

• When a company directly sells its equity to an investor, it is called private placement.


What is book building?

• The process by which shares of a company are given support by another company is called book building. The company which undertakes book building, tries to ensure that the shares don’t fall below certain level.


Which is this – demand curve or supply curve?


Solution

• Supply curve


What is PPC?

• Production possibility curve


What is labour mobility?

• Labour is one of the factors of production (the other factor is capital). When the labour is able to move from one place to another, it is called labour mobility.


In the following case, there is shift in a curve, identify the reason of

shift?


Solution

• Supply has decreased. Answer.


What is basis point?

• In international markets, when firms go to raise funds, they get loan at LIBOR + basis point. For example, if interest rate is LIBOR + 300 basis point, and LIBOR is 5, then the rate of interest is 5.3%.

• These basis points show change from LIBOR (London Inter Bank Offered Rate).


When does the law of increasing return end?


Solution

• As you can see there are three stanges:

• 1. increasing returns

• 2. constant returns

• 3. decreasing returns

• The law of increasing returns ends at point N. answer.


what is GDP, and how is it measured?

• GDP= Gross Domestic Product.• There are 3 ways to measure it: 1. Calculate total earnings of every one and

sum it up.2. Calculate expenses of each individual in

the nation and sum it up.3. Identify total production of goods and

services in the nation by each unit and sum it up.


What is utility and what is its impact?

• Utility is the benefit that a consumer derives from consuming some product or service.

• Utility reduces with each unit of consumption• There are 2 concepts regarding utility : • 1. Cardinal utility – the utility can be

measured• 2. ordinal utility – utility cannot be measured.


What do you understand from diminishing marginal utility?

• Utility reduces with each additional unit consumed. Thus diminishing marginal utility means the utility will reduce with each unity being consumed.

• Marginal utility means the utility derived from one additional unit consumed.


What is the relation between demand & supply regarding factors

of production Real wage, W/P

Income, output, Y

Price level, P

Income, output, Y

Labor, L Labor, L

W/P1

W/P2

L 5 Ld(W/P)

L2L1

Y2

Y1

Y 5 F(L)

L2L1

P2

P1

Y 5 Y 1 a(P 2 P

e)

Y2Y1

1. An increase in the price level . .

3. ...which raises employment, . .

4. ... output, . .

5. ... and income.

2. .. . reduces the real wage for a given nominal wage, . .

6. The aggregatesupply curvesummarizes these changes.

(a) Labor Demand (b) Production Function

(c) Aggregate Supply


What are the factors of production?

• There are many, some of them are : 1. Labour2. Capital3. Technology4. Entrepreneurship

We generally take only 2 factors while doing analysis : these are 1. capital 2. labour


What is short run and what is long run?

• Short run is the period in which we cannot increase the capacity of the plant. Long run is the period in which we can increase or decrease the capacity of the plant and also install or close a plant.

• In short run only one factor can be changed – labour – other factors are constant

• In long run both labour and capital can be changed. Plant capacity be altered.


What is bank rate ?

• The rate at which the central bank ( RBI in the case of India or FED bank in the case of the USA) gives loan to other bank is called bank rate.


What is PLR?

• Prime lending rate – it is the rate at which a bank gives loan to prime customer. Prime customer means the customer, whose economic conditions are very good and who is credit worthy.


What is CRR & SLR?

• CRR = cash reserve ratio (it denotes the ratio of cash held by banks against the deposits)

• SLR = statutary liquidity ratio (it denotes the ratio of investments in government and approved securities by the banks).


Suppose the total deposits are 1 lakh crores in India – RBI reduces CRR by 1%, what will happen?

• 1% of 1 lakh crore = 1000 lakh crores. Thus liquidity in the market will increase by 1000 lakh crore Rupees – as bank will be able to give more loans and will be able to give money easily. Due to ease in liquidity, the industry will benefit as it will be able to get more funds easily. However, inflation may increase due to this.


Which is called banker of banks or banker of last resort?

Central bank (RBI in India).


What is liquidity?

• Availability of cash / cash equivalent is called liquidity.


What is sensex?

• It is index of stock prices based 30 selected scrips. These 30 scrips are those which are selected on the basis of market capitalisation & business volumet.

• It is presented by BSE (Bombay stock exchange).


What is NIFTY?

• It is index of stock prices based 50 selected scrips. These 50 scrips are those which are selected on the basis of market capitalisation & business volumet.

• It is presented by NSE (National stock exchange).


What is NPA?

• Non performing assets –in banks, the major assets are loans given to companies / units / people. Some times some loans become overdue - those loans (assets) which are not performing – means not making regular payments of their outstanding amounts are called NPA.

• NPA word is used for banking industry.


What is CAC?

• Capital Account Convertibility.

• When foreign exchange is converted into capital account freely even in capital account, it is called capital account convertibility.

• Capital account here mean money raised for capital projects / investment purpose etc.


What is LC?

• Letter of credit, = when a bank gives loan against export documentation, it is called LC. For example, if you export some goods, the buyer send you acceptance of the bill and the bank of the buyer gives guarantee, then your bank can give you loan agains these documents. This is called LC.


What is packing credit?

• When you have received an order from an importer for some goods and you want to make goods as per the order, then you may take packing credit from the banks. In packing credit the bank gives you loan for purchasing raw material, and other working capital expenses. It is given for period till exports are sent – later LC is given.


What is forex reserves?

• Foreign exchange reserves of a country is called forex reserve.

• It will increase in following cases : If FDI will increase, FII will invest more money and exports will increase, increase of tourists to your country, repatriation of money by NRIs (non residents Indians),


What is IRS?

• INTEREST RATE SWAP

• Banks use these instruments to minimise their risks.


What is ALM?

• Asset liability management – banks try to match the cash flows of cash inflow and cash outflow through ALM. They try to match their assets and liabilities.

• Banks’s assets are its loans

• Bank’s liabilities are its deposits

• Matching them is called ALM.


What is hedging?

• When banks use various instruments like swaps, options etc. to reduce their risk exposure it is called hedging.


What FCD?

• Fully convertible debentures.


What is market capitalisation?

• No. of shares multiplied to the market price per share.

• For example, the share of reliance is quoted at Rs. 1250. suppose there are 100 shares in the market. The market capitalisation is 125000.


What do you understand from reverse mortgage?

• In mortgage, a person goes to bank and puts his land / building as mortgage to obtain loans (humge amount simultaneously) from bank and then he used to repay it in long time. In reverse mortgage, the bank gives land / building to the other person and gives money also on monthly basis and takes back the land / building after long time. (many old age persons are resorting to this option for maintaining their living)


What is microfinance?

• Raising small deposits (let us say Rs. 10 per month) – pooling this money together and Giving loan in very small amount (let us say Rs. 2000) so that a person may start a micro-enterprise – and can become self dependent. It is very successful business model –as has been proved by Gramin Bank and SEWA.


ABOUT AFTERSCHO☺OL

Afterschoool conducts three year integrated PGPSE (after class 12th along with IAS / CA / CS) and 18 month PGPSE (Post Graduate Programme in Social Entrepreneurship) along with preparation for CS / CFP / CFA /CMA / FRM. This course is also available online also. It also conducts workshops on social entrepreneurship in schools and colleges all over India – start social entrepreneurship club in your institution today with the help from afterschoool and help us in developing society.


Why such a programme?

• To promote people to take up entrepreneurship and help develop the society

• To enable people to take up franchising and other such options to start a business / social development project

• To enable people to take up social development as their mission

• To enable people to promote spirituality and positive thinking in the world


Who are our supporters?

• Afterschoolians, our past beneficiaries, entrepreneurs and social entrepreneurs are supporting us.

• You can also support us – not necessarily by money – but by being promotor of our concept and our ideas.


About AFTERSCHO☺OL PGPSE – the best programme for developing great

entrepreneurs• Most flexible, adaptive but rigorous programme• Available in distance learning mode• Case study focused- latest cases • Industry oriented practical curriculum• Designed to make you entrepreneurs – not just

an employee• Option to take up part time job – so earn while

you learn • The only absolutely free course on internet


Workshops from AFTERSCHO☺OL

• IIF, Delhi• CIPS, Jaipur• ICSI Hyderabad Branch• Gyan Vihar, Jaipur• Apex Institute of Management, Jaipur• Aravali Institute of Management, Jodhpur• Xavier Institute of Management, Bhubaneshwar • Pacific Institute, Udaipur• Engineering College, Hyderabad


Flexible Specialisations:

• Spiritualising business and society• Rural development and transformation• HRD and Education, Social Development• NGO and voluntary work• Investment analysis,microfinance and inclusion • Retail sector, BPO, KPO• Accounting & Information system (with CA / CS /CMA)• Hospital management and Health care• Hospitality sector and culture and heritage• Other sectors of high growth, high technology and social

relevance


Salient features:• The only programme of its kind (in the whole world)• No publicity and low profile course• For those who want to achieve success in life – not just a

degree• Flexible – you may stay for a month and continue the rest of

the education by distance mode. / you may attend weekend classes

• Scholarships for those from poor economic background• Latest and constantly changing curriculum – keeping pace

with the time• Placement for those who are interested• Admissions open throughout the year • Latest and most advanced technologies, books and study

material


Components • Pedagogy curriculum and approach based on IIM Ahmedabad and ISB

Hyderabad (the founder is alumnus from IIMA & ISB Hyderabad)• Meditation, spiritualisation, and self development • EsGotitial softwares for business• Business plan, Research projects• Participation in conferences / seminars• Workshops on leadership, team building etc. • Written submissions of research projects/articles / papers• Interview of entrepreneurs, writing biographies of entrepreneurs• Editing of journals / newsletters• Consultancy / research projects • Assignments, communication skill workshops• Participation in conferences and seminars• Group discussions, mock interviews, self development diaryng • Mind Power Training & writing workshop (by Dr. T.K.Jain)


Pedagogy

• Case analysis,• Articles from Harvard Business Review • Quiz, seminars, workshops, games, • Visits to entrepreneurs and industrial visits• PreGotitations, Latest audio-visuals• Group discussions and group projects• Periodic self assessment• Mentoring and counselling• Study exchange programme (with institutions out of

India)• Rural development / Social welfare projects


Branches

• AFTERSCHO☺OL will shortly open its branches in important cities in India including Delhi, Kota, Mumbai, Gurgaon and other important cities. Afterschooolians will be responsible for managing and developing these branches – and for promoting social entrepreneurs.


Case Studies

• We want to write case studies on social entrepreneurs, first generation entrepreneurs, ethical entrepreneurs. Please help us in this process. Help us to be in touch with entrepreneurs, so that we may develop entrepreneurs.


Basic values at AFTERSCHO☺OL

• Share to learn more• Interact to develop yourself• Fear is your worst enemy• Make mistakes to learn • Study & discuss in a group• Criticism is the healthy route to mutual support

and help • Ask fundamental questions : why, when, how &

where?• Embrace change – and compete with yourself

only


www.afterschoool.tk social entrepreneurship for better

society

accounting & economics for business 6 november

Technology

ordinal utility utility

bank rate

cardinal utility

factors of production

solution supply curve

production possibility

demand curve

highest production